Gregor.us

Global Gold Production: How Sustainable a Rebound?

February 3, 2012

Recently released data from the US Geological Survey shows that global gold production, after falling every year between 2001 and 2008, finally rose for the past three years. In 2011, production reached 2,700 metric tons. However, in a larger context, the past decade has been quite poor for gold production and the compound annual growth (CAGR) rate has fallen well below the average of the past 110 years. The high cost of marginal supply and the poor production performance of the large cap gold miners fits in nicely to the theme. (And mirrors the experience of “Big Oil” the past decade, which has been unable to replace reserves with oil, and has increasingly turned to natural gas). Much of the new production therefore is coming from smaller plays, and from the smaller mining companies. But whether a large array of smaller deposits can make up for the decline of the larger deposits—sustainably—is unclear. What’s more certain however is that new supply is only possible with the new price range of gold, above, say, $1200 an ounce. As with oil, should price fall dramatically from here, supply too would quickly adjust downward.

Mining for gold is an interesting phenomenon, revealing cracks in the foundation of economics and society. Mining is unnecessary, energy-intensive with many externalities. It persists. Economists have trouble pricing gold without mining? A reasonable benign dictator would stop gold mining the first day in power. It has some religio/superstitious support? We have about one ounce for each person. Let’s stop mining and pass out the remaining gold equally.

http://abellia.myopenid.com/ Andrew

You say that people have the wrong skills. What are the right skills – working in a coal mine? (I’m being serious here)

I’m not sure how your vision of the future is good for the average American. Exports are only beneficial if you get something of value in return. What would we get that we aren’t getting right now? How would the benefits of manufacturing or more general exports “trickle down” to the average guy on the street?